Climbing out of poverty

If you are a Bombayite or a Mumbaikar ( a resident of Mumbai), you would know that the best place to get bargain leather goods is Dharavi. However, it is also one nauseating shopping experience because Dharavi also happens to be the biggest slum in Asia.

Dharavi has always been a hotbed of micro entrepreneurship, with business models straight out of Prahlad’s Bottom of the Pyramid. Guardian now reports that the output of the slum is a staggering £700 mn annually.

The most incredulous fact, something that most Mumbaikars would be surprised with, is that Dharavi actually contributes to keeping Mumbai clean and green. Here’s the full article along with audio and slideshows.

Also, here’s a Youtube video showing Dharavi from the skies

What is the business case for a disruptive business model / technology ?

Imagine being commissioned by Chad Hurley to work on a project for “Online video sharing” or by Steve Jobs to work on a project to deliver “Digital Music Player with a cool interface”. What business case or strategy would they have shared ? There was no existing market for their inventions before they introduced it. They could share with us their vision as shaped by the trends , the changing customer behaviour and the enabling technologies , but they would have been hard to pin down on what they thought the business benefits case might look like. In fact, Youtube did not even have a revenue model till a year after its launch

What does this mean for the well-intentioned analyst who believe their job is to protect the customer’s stakeholder value by coaching them against investing in such projects ?

The truth is that it is not always possible to judge disruptive technologies or business models using traditional tools of analysis. In fact, Clayton Christensen, the Harvard Professor who coined the term “disruptive innovation” advises us of the following

“In highly uncertain situations that typify disruptive innovations, following the typical strategy-making process just doesn’t work. In these uncertain situations, some companies believe they need to fly by the seat of their pants. However, companies can follow a rigorous process by using an emergent strategy supported by a discovery-driven planning process that enables them to adjust their strategy when they encounter unanticipated opportunities, problems and successes.”

As a business analyst the role is more about supporting this emergent strategy development process and not just a resource allocation filter. Admittedly this requires a significant mind-shift. Michael Hugos gives us a very important mantra – Be strategically focussed and tactically agile to meet the needs of a customer in an dynamic business environment. Delivering business value is as much about offering flexibility for the business to change direction as it is about delivering incremental revenues or saving costs.

Microlending should not just be about philanthropy

Microfinance is clearly in vogue with Prof. Yunus of Grameenphone winning a noble prize this year. Here’s a link to the story

James Webster, a colleague of mine, has recently posted about Kiva, a non-profit organization that allows individuals to contribute towards microfinancing a venture in the developing regions such as Eastern Europe, Asia, Africa and South America. The thing that struck me about such microlending operations is that they all are non-profit organizations. Startup Journal’s post on microlending also speaks about the issue of associating philanthropy with such operations.

Given that the returns on these investments are not very high, it would be very hard for an aggregator of microfinance to actually run a highly profitable concern.So they often call for volunteers to help them out in their functions such as accounting, Marketing & PR, software development etc. However, these voluntary activities are very intrinsic and cater to the aggregator’s own operations.

The fact that each outlay is very small, it also stands to reason that the investors themselves cannot offer value to the entrepreneurs beyond the initial seed and occasional consulting. What is truly needed is a support network for the entrepreneurs themselves. It should be possible for the entrepreneurs to get support from volunteers within the local region. This could be a management student who can help in formulating a marketing strategy, a local accountant who can offer an hour of their time, a printer who can print a small order of leaflets etc. These kind of micro support would go a long way in boosting the overall profitability of the business.

The other interesting outcome of microlending can be innovative business models that cannot be tried directly in a developed nation. C. K. Prahalad has already propounded the theory about the “bottom of the pyramid” (World’s poorest markets) where innovative practices and ideas can be harvested and tested.

The aggregator’s role, thus, should not just be about financing the entrepreneur. It should also be about facilitating a volunteer network to support the entrepreneur and it should be about harvesting innovative ideas from around the world. Collectively, these can generate the returns for the aggregator to make them move away from being non-profit charity institutions to a lucrative business model.